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International Tax Planning

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-How exactly does international tax planning assist a U.S. citizen avoid taxes?
-For a U.S. multi-location manufacturer, how might they use transfer pricing to reduce their tax liability. Assume a firms steel mill, makes steel which goes to its machining operation, and the machining operation ships parts to an assembly plant. Each of the 3 operations is in different countries with different tax rates.
-Discuss what you feel are the legal, ethical and fairness issues involved in doing this type of international tax planning.

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The solution discusses international tax planning.

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International Tax Planning to Avoid Taxes

The international tax planning assists the US citizens to avoid taxes. It is because through the international tax planning, U.S. citizens are allowed to make investment in the countries, which have no tax or very lower rates of tax. These countries are generally called as tax heavens. These tax heavens are the part of international tax planning of individuals, which enable them to avoid the tax liabilities in their home country (Kobetsky, 2011). International tax planning provides a legal way to the people in U.S. to avoid the taxes as most of the people invests their income in the countries, which are tax heavens. It helps them to avoid the tax liabilities and increase their income and savings. International tax planning assists the people to use the international transactions that facilitate to use the resources for exploiting the domestic tax laws in a legal way. Taxpayers use the tax planning as per the approved strategies to minimize the tax liabilities (Broe, 2007). Thus, international tax planning assists at a greater extent to U.S. citizens to avoid taxes.

Use of Transfer Pricing

Multi-location manufacturers can use the transfer pricing to reduce their ...

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